Correlation Between GM and Great-west Core
Can any of the company-specific risk be diversified away by investing in both GM and Great-west Core at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Great-west Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Great West E Bond, you can compare the effects of market volatilities on GM and Great-west Core and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Great-west Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Great-west Core.
Diversification Opportunities for GM and Great-west Core
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Great-west is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Great West E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great-west Core and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Great-west Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great-west Core has no effect on the direction of GM i.e., GM and Great-west Core go up and down completely randomly.
Pair Corralation between GM and Great-west Core
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Great-west Core. In addition to that, GM is 9.84 times more volatile than Great West E Bond. It trades about -0.05 of its total potential returns per unit of risk. Great West E Bond is currently generating about 0.1 per unit of volatility. If you would invest 954.00 in Great West E Bond on November 3, 2024 and sell it today you would earn a total of 6.00 from holding Great West E Bond or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Great West E Bond
Performance |
| Timeline |
| General Motors |
| Great-west Core |
GM and Great-west Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Great-west Core
The main advantage of trading using opposite GM and Great-west Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Great-west Core can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Great-west Core will offset losses from the drop in Great-west Core's long position.The idea behind General Motors and Great West E Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Great-west Core vs. John Hancock Financial | Great-west Core vs. Blackrock Financial Institutions | Great-west Core vs. Financials Ultrasector Profund | Great-west Core vs. Prudential Financial Services |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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